Select

Home / Economy / Oil production cuts could mean a positive return locally

Oil production cuts could mean a positive return locally

Posted on Thursday, December 06, 2018 by Mercedes Poole

Oil production cuts could mean a positive return locally

Western Canadian Select catapulted to US$32.91 a barrel on Monday morning, up around US$11 from Friday's close, as the market immediately priced in the impact of AlbertaPremierRachel Notley's plan to draw down the province's crude backlog via production cuts.

"These resources are owned by Albertans and Canadians and we're at a real unfair advantage selling at such a discount as we are and losing the amount of revenues we're losing", says Petrone.

In an email, Crescent Point Energy said, right now, it doesn't produce more than 10,000 barrels of oil a day, which is where the production cuts in Alberta are set.

Canada's largest oil and gas company, Suncor Energy Inc., said Monday its estimate of the impact of the provincial cuts will be provided when it issues its 2019 capital and production guidance.

"In the last few weeks, this price gap has reached historic highs", Notley said Sunday in a speech timed to run live on supper-hour newscasts in Alberta.

The Enbridge Line 3 project, shipping more oil from Alberta to the U.S. Midwest is expected to come online late next year.

Even with the differential costs, Saskatchewan is still coming out ahead because oil prices remain high (resulting in an extra $105 million) and a weaker Canadian dollar works in the government's favour, adding an extra $11 million to provincial coffers. It said 90 per cent of its oil production is either in the US, or is downstream of the recent apportionment points which are impacting prices, so it's average selling price hasn't been as impacted as other companies. It ends on December 31, 2019.

The companies hope that reducing production will boost regional oil prices as well as their profitability.

It also hasn't been much affected by the price differential. Alberta's oil is now fetching bargain basement prices thanks to a growing glut and lack of pipeline capacity to get oil to market.

He said Notley's decision was courageous given the lack of consensus among industry players over whether the province should intervene.

During the first year, the ship-fuel standard will make WCS crude about $7/bbl or $8/bbl cheaper relative to West Texas Intermediate futures than it would normally be, IHS Markit's Barrow, V.P. of the oil markets for midstream and downstream energy, said by phone from Houston.

The federal government has not yet decided whether it will contribute anything toward Alberta's purchase of new rail cars so that two more trains a day can transport crude from Alberta to refineries in Canada and the United States. Husky Energy Inc., which owns refineries in Canada and the USA, said in an emailed statement that a government-ordered curtailment or other interventions can possibly have negative investment, economic and trade consequences.

The losers include integrated producers who will likely pay more for their refining feedstock and companies that had meant to grow their production in the first half of 2019, it said.

"Our oil production and market for our product is significantly different than Alberta's".

Imperial CEO Rich Kruger warned of the danger of "unintended consequences" of the production cuts, including to competitiveness and trade. "They've seen ups and downs - they've never seen anything like this before", he told CTV's Power Play on November 28.

Popular news

More information about the Nokia 8.1 is revealed
There is a Qualcomm Snapdragon 710 processor under the hood along with 4GB of RAM and 64GB of built-in storage. The device is also said to be capable of taking "superior" images under challenging light situations.Thursday, December 06, 2018

Chief financial officer of China's Huawei arrested in Canada
The Globe and Mail reported earlier Wednesday that she was arrested on suspicion of violating USA trade sanctions on Iran. Meng, 46, has been the CFO of Huawei Technologies since 2011 and vice chair of the company since March 2018.Thursday, December 06, 2018

Flu shot even more important when living with heart disease
"We know that nationally, 80 percent of the pediatric deaths were in children who were not vaccinated against the flu ". Flu is typically spread by droplets when someone with the flu talks, coughs, or sneezes.Thursday, December 06, 2018